Q.What Are The New Eligibility Requirements To File A Chapter 13 Bankruptcy?
A.Individuals wishing to file for bankruptcy must meet certain eligibility requirements. To file a Chapter 7 bankruptcy, the individual must pass the "means test" to file in Chapter 7 (have an average monthly income less than the state's median income). If your average monthly income exceeds your state's median income for the six months prior to your intended bankruptcy filing, then you might be precluded from filing a Chapter 7 bankruptcy petition. The question then arises as to whether you qualify to file a petition for a Chapter 13 Bankruptcy. To file for a Chapter 13 Bankruptcy, the following three requirements must be met:
- You must be an individual. Businesses do not qualify;
- Your Debts Must Not Be Too High. You will not qualify for a Chapter 13 Bankruptcy if your Secured Debts exceed $922,975 (this amount is increased every three years). A secured debt is one with collateral— if you fail to make a payment the creditor can retrieve a specific piece of property (e.g., your home loan, a car loan, any judgment in which the creditor has already filed a lien against a piece of property, etc..).
In addition, to be eligible for Chapter 13 Bankruptcy, your Unsecured Debts for which there is no collateral (e.g., credit card bills, utility bills, medical bills, etc..) cannot exceed $307,675. (this amount is also increased every three years); and
- You Must Be Current on Your Income Tax Filings. To file for bankruptcy, both Chapter 7 and Chapter 13, the filer needs to submit proof of income on his or her federal and state income tax returns for the four tax years prior to the bankruptcy filing date. If the bankruptcy filer needs additional time to get current on his or her tax filings, the court can postpone the bankruptcy proceedings, but if the bankruptcy filer fails to produce his or her tax returns for the four years preceding the bankruptcy filing date, the Chapter 13 bankruptcy petition will be dismissed (thrown out of court).